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In an ERISA decision worth nearly $6 million, a federal judge has ruled that 52 former employees of Mobil Corp. who were not hired by the newly formed Exxon Mobil Corp. after a 1999 merger are entitled to severance pay. Lawyers for Exxon Mobil argued that the workers were not entitled to severance because they never truly lost their jobs. They merely found themselves working for a different company, Tosco Corp., which had purchased some of Mobil’s assets in a deal designed to win FTC approval for the merger. But U.S. District Judge Cynthia M. Rufe found that while the severance plan documents made it clear that such workers would not be eligible for severance, that fact was not included in a “summary plan description” distributed to workers at the time that news of the upcoming merger was first announced. “If an employee were expected to read the entire plan to obtain an understanding of benefits provided, then there would be no need to provide a summary plan description,” Rufe wrote in her 50-page decision in Hooven v. Exxon Mobil Corp. Rufe said the 3rd U.S. Circuit Court of Appeals held last year in Burstein v. Retirement Account Plan for Employees of AHERF that “where there is a conflict between a plan document and a summary plan description, the summary plan description governs.” In Burstein, Rufe said, the 3rd Circuit “emphasized … Congress’s desire that the summary plan description be transparent, accurate and comprehensive.” The decision announces Rufe’s findings and legal conclusions following an eight-day non-jury trial in January 2003. Although Rufe rejected three of the plaintiffs’ ERISA claims, her verdict in their favor on the fourth claim effectively entitles them to full severance pay benefits. The ruling is a victory for plaintiffs’ attorneys John A. Guernsey, Frank R. Emmerich Jr., Susan L. Bucknum and Colleen F. McCook of Conrad O’Brien Gellman & Rohn. Guernsey said in an interview that the 52 workers — mid-level managers in the Philadelphia and Washington, D.C., areas — are now entitled to severance packages ranging from $80,000 to $250,000 depending on their years of service to Mobil. Exxon Mobil’s lawyer, Mark S. Dichter of Morgan Lewis & Bockius, said the company is studying the decision and considering whether to file an appeal. But Dichter stressed that Rufe had rejected the plaintiffs’ arguments that Mobil had intentionally concealed facts from the workers and the theory that the plaintiffs had “detrimentally relied” on Mobil’s misleading statements in any way. Previewing arguments he may make on appeal, Dichter said he disagreed with Rufe’s ruling that Mobil was not entitled to correct the error in the summary plan description. In court papers, plaintiffs’ lawyers argued that Mobil was aware that “thousands of jobs” could be lost in the merger and that it announced the severance package at the time that news of the merger talks went public because it was concerned about “the anxiety the announcement would create.” The purpose of the severance package, they argued, “was to encourage employees to remain with Mobil while the companies awaited regulatory approval of any merger.” Mobil and Exxon were worried about regulatory approval, the plaintiffs’ lawyers said, because the two companies’ assets and geographic locations overlapped, and they were taking the position that they did not want to divest assets. The plaintiffs’ lawyers said in court papers that the workers were assured that if they were not selected for a job with the combined company, they would be entitled to severance pay. But they said the summary description of the severance plan omitted a critical fact that was included in the plan documents — that workers whose jobs were transferred to another company as a result of a divestiture prior to the merger would not be entitled to severance pay. Instead, they said, the workers were informed of that fact only after Mobil successfully negotiated with the Federal Trade Commission to divest assets to Tosco in order to secure the FTC’s agreement not to oppose the merger. Rufe rejected three of the plaintiffs’ claims: breach of fiduciary duty, equitable estoppel and ERISA reporting violations. The breach of fiduciary duty claim failed, Rufe found, because the workers “failed to show that they detrimentally relied upon the representations of Mobil management or the (summary plan description).” Although the workers “may have believed” that they would be entitled to severance pay due to the misleading description in the summary, Rufe found that “they did not maintain their employment with Mobil or fail to seek alternative employment because of this omission.” The equitable estoppel claim failed, Rufe said, because there was no proof that the omission from the summary was the result of “a campaign to conceal the actual terms” of the plan. “The court finds that this failure is one of inartful drafting, not fraud or active concealment,” Rufe wrote. “It was not an underhanded effort to retain employees who might otherwise seek employment with competitors.” As for the alleged ERISA reporting requirements violations — which could have resulted in fines for every day that the workers were allegedly misled — Rufe found that the plaintiffs fell short of the law’s requirement that they prove the existence of “extraordinary circumstances,” such as “acts of bad faith,” “attempts to actively conceal,” or fraud. But Rufe concluded that the plaintiffs had prevailed in their claim for breach of contract for vested severance benefits. Finding that the text of the summary of the plan “controls,” Rufe concluded that the contract established by the announcement of the severance package effectively promised the workers that they would get severance pay if they were not hired by the combined company. “There is simply no indication in the text of the (summary) that … employees who are terminated from Mobil but subject to divestiture would be ineligible for enhanced severance benefits,” Rufe wrote. “The burden of clarity is on defendants, and the consequence of inaccurate drafting falls squarely on the employer,” Rufe wrote.

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